Madoff accountant pleads not guilty to defrauding clients

Bernard Madoff’s former accountant pleaded not guilty to charges he helped the convicted con man carry out a Ponzi scheme, less than two weeks before the start of a trial of five ex-employees who are accused of aiding the fraud.

Paul Konigsberg, 77, entered his plea today before U.S. Magistrate Debra Freeman, who allowed him to be freed on $2 million bail. He was arrested this morning by the Federal Bureau of Investigation in New York, said Peter Donald, an FBI spokesman.

Madoff steered “important” clients to Konigsberg, who helped cover up fraudulent transactions by fabricating books and trading records, prosecutors in the office of Manhattan U.S. Attorney Preet Bharara allege in a five-count indictment unsealed today in federal court in Manhattan.

Konigsberg is accused of participating in the conspiracy from 1992 until Madoff’s arrest in December 2008. The scheme cost investors about $17 billion in lost principal, the U.S. said.

“Madoff needed the assistance of certain willing outsiders that could be trusted to handle otherwise suspicious activity,” the U.S. said. “Madoff directed many of his clients -- including some of his most important customers, in whose accounts Madoff executed the most glaring fraudulent transactions” to use Konigsberg as their accountant.

‘A Victim’

Konigsberg “is a victim of Bernie Madoff,” his lawyer, Reed Brodsky, said in an interview. “He looks forward to clearing his good name.”

Madoff, who masterminded the Ponzi scheme for decades, was arrested and charged after he confessed to federal authorities about the scheme on Dec. 11, 2008.

Konigsberg handled various accounting assignments in connection with more than 300 of the accounts at Bernard L. Madoff Investment Securities LLC, according to the U.S.

At times Konigsberg dictated the transaction activity in his customers’ accounts to Madoff employees, including Frank DiPascali Jr., Madoff’s former chief financial officer, and a second unidentified co-conspirator who reported to DiPascali, the U.S. said.

Madoff guaranteed clients a specific rate of return and fabricated trades that Konigsberg was “well aware” of, prosecutors said. Madoff steered clients to Konigsberg, who is accused of helping create back-dated trading records that helped conceal the scheme, the U.S. alleges.